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Regulatory Capital | 9 Months Ended
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Sep. 30, 2024
Banking and Thrift, Other Disclosure [Abstract] |
Regulatory Capital | Regulatory Capital Sallie Mae Bank (the “Bank”) is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations, and financial position. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors. The Bank is subject to the following minimum capital ratios under U.S. Basel III: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent, and a Total risk-based capital ratio of greater than 10.5 percent. To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent. In July 2023, the federal banking agencies proposed a rule to implement significant changes to the U.S. Basel Ill regulatory capital requirements. The proposed changes to the regulatory capital requirements generally would amend or introduce approaches and methodologies that would apply to banking organizations with total consolidated assets of $100 billion or more or to banking organizations with significant trading activity. The proposed rule therefore would not affect the Bank's capital requirements or the calculation of its capital ratios. Under regulations issued by the FDIC and other federal banking agencies, banking organizations that adopted CECL during the 2020 calendar year, including the Bank, could elect to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. The Bank elected to use this option. Therefore, the regulatory capital impact of the Bank’s transition adjustments recorded on January 1, 2020 from the adoption of CECL, and 25 percent of the ongoing impact of CECL on the Bank’s allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes (collectively, the “adjusted transition amounts”), were deferred for the two-year period ending January 1, 2022. On each of January 1, 2022, 2023, and 2024, 25 percent of the adjusted transition amounts were phased in for regulatory capital purposes. On January 1, 2025, the remaining 25 percent of the adjusted transition amounts will be phased in for regulatory capital purposes, with the phased in amounts included in regulatory capital at the beginning of the year. The Bank’s January 1, 2020 CECL transition amounts increased our allowance for credit losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used. At September 30, 2024, the adjusted transition amounts that were deferred and are being phased in for regulatory capital purposes are as follows:
|  | Adjusted Transition Amounts |  | Phase-In Amounts for the Year Ended |  | Phase-In Amounts for the Year Ended |  | Phase-In Amounts for the Nine Months Ended |  | Remaining Adjusted Transition Amounts to be Phased-In
(Dollars in thousands) |  | December 31, 2021 |  | December 31, 2022 |  | December 31, 2023 |  | September 30, 2024 |  | September 30, 2024
Retained earnings |  | $ | 836,351 |  |  | $ | (209,088) |  |  | $ | (209,088) |  |  | $ | (209,088) |  |  | $ | 209,087 |
Allowance for credit losses |  | 1,038,145 |  |  | (259,536) |  |  | (259,536) |  |  | (259,536) |  |  | 259,537 |
Liability for unfunded commitments |  | 104,377 |  |  | (26,094) |  |  | (26,094) |  |  | (26,095) |  |  | 26,094 |
Deferred tax asset |  | 306,171 |  |  | (76,542) |  |  | (76,542) |  |  | (76,543) |  |  | 76,544 |
The Bank’s required and actual regulatory capital amounts and ratios, including applicable capital conservation buffers, under U.S. Basel III are shown in the following table. The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated. The Bank has elected to exclude accumulated other comprehensive income related to both available-for-sale investments and swap valuations from Common Equity Tier 1 Capital. At September 30, 2024 and December 31, 2023, the unrealized loss on available-for-sale investments included in other comprehensive income totaled $69 million and $115 million, net of tax of $22 million and $37 million, respectively. The capital ratios would remain above the well capitalized thresholds, including applicable capital conservation buffers, if the unrealized loss became fully recognized into capital.
(Dollars in thousands) |  | Actual |  | U.S. Basel III Minimum Requirements Plus Buffer(1)(2)
| Amount | Ratio |  | Amount |  | Ratio
As of September 30, 2024(3): |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 2,985,360 |  | 11.6 | % |  | $ | 1,803,995 |  | > | 7.0 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 2,985,360 |  | 11.6 | % |  | $ | 2,190,566 |  | > | 8.5 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 3,318,657 |  | 12.9 | % |  | $ | 2,705,993 |  | > | 10.5 | %
Tier 1 Capital (to Average Assets) |  | $ | 2,985,360 |  | 10.1 | % |  | $ | 1,185,423 |  | > | 4.0 | %
As of December 31, 2023(3): |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 3,019,973 |  | 12.3 | % |  | $ | 1,719,621 |  | > | 7.0 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 3,019,973 |  | 12.3 | % |  | $ | 2,088,111 |  | > | 8.5 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 3,334,140 |  | 13.6 | % |  | $ | 2,579,432 |  | > | 10.5 | %
Tier 1 Capital (to Average Assets) |  | $ | 3,019,973 |  | 10.2 | % |  | $ | 1,184,213 |  | > | 4.0 | %
(1) Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer. (2) The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework. (3) For both September 30, 2024 and December 31, 2023, the actual amounts and the actual ratios include the adjusted transition amounts discussed above that were phased in at the beginning of 2024 and 2023. Bank Dividends The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank declared $116 million and $414 million in dividends to the Company for the three and nine months ended September 30, 2024, respectively, and $100 million and $400 million in dividends to the Company for the three and nine months ended September 30, 2023, respectively, with the proceeds primarily used to fund share repurchase programs and stock dividends. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to enable the Company to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its share repurchase programs.

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- Definition The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a)(2) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (c)(2) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1D -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1D Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1A -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 942 -SubTopic 505 -Name Accounting Standards Codification -Section 50 -Paragraph 1F -Publisher FASB -URI https://asc.fasb.org/1943274/2147477270/942-505-50-1F + Details
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